The enacting of the mainland's new Enterprise Bankruptcy Law in June last year is a positive development in its corporate insolvency regime. But more than a year later, the law still faces some challenges in its implementation that are not going to be easily or rapidly solved, according to Hong Kong insolvency specialists. 'It's a good thing to have the new bankruptcy law, and Hong Kong accountants and professionals can certainly help in its development,' said Derek Lai, national leader of reorganisation services, Deloitte China. 'But there are a lot of challenges. The law is not that clear and it's still in its infant stages, although compared to before it is much better.' The new bankruptcy law is China's first since 1986. It is similar to those of other countries, particularly the United States, and applies to all legal entities, including foreign enterprises. The law uses a professional administrator whose role is to help creditors and assist in assuring bankruptcies run smoothly. There are clear provisions on who may serve as an administrator. PricewaterhouseCoopers, for example, is an approved administrator in Beijing and Guangzhou. Other Big Four firms and multinational accounting firms are approved administrators in various cities. According to commentary from PricewaterhouseCoopers, the new law has brought the bankruptcy regime in China in line with international practice. Having a professional, independent organisation such as an accounting firm as an administrator in bankruptcy proceedings is different from previous practice in China, where the bankruptcy process was under the control of a liquidation committee comprising mainly government officials and related parties. Under the old law, official figures showed the number of cases heard nationwide to be between 8,000 and 9,000 each year. Accurate figures since the new law was enacted last year are impossible to pin down, but the number of cases heard in the courts is known to have dropped significantly. The lower numbers are leading to widespread speculation that there are problems in the law's practical application. 'The new law is a lot more sophisticated than the old one, and is intended to align with as many best practices in the world as possible. But it is a giant step forward for China,' said Rainier Lam, partner, advisory division, PricewaterhouseCoopers. 'One group of people most interested in the new law is the judges, and they weren't prepared for it in the sense that many of them simply didn't have relevant experience and are still learning,' he said. 'Accordingly, it is a mammoth task to bring them up to date and also to give them the necessary training to enable them to deal with bankruptcy cases under the new law,' he said. 'It will take time.' To illustrate his point, Mr Lam said that even for an approved administrator to open an administrator account at a bank was still proving difficult because the banks were neither familiar with the law nor had they encountered an administrator before. 'We are acting now as administrator of a case in Guangzhou and it took us some time to find a bank there that had experience opening a bank account for an administrator,' Mr Lam said. 'Right now, the new law has not received the recognition that it deserves, and that will probably take a couple of years. But when people have more experience of bankruptcy cases, that will help them understand what needs to be done. At the moment there isn't the mechanism to deal with issues like opening an administrator bank account,' he said. Educating the judiciary is just one task holding back the smooth implementation of the new bankruptcy law. To add to the general woes generated by the change, the supplementary rules and regulations that should be in place to support the general principles of the law and help the courts determine how to deal with bankruptcy applications are still in development. According to official announcements in mid-July, the Supreme People's Court has started the work of drafting the so-called 'Regulations of Several Issues Concerning the Application of Enterprises Bankruptcy Law' so as to conform with the implementation of the new law. It is understood that these regulations will interpret the law in an integrated and systematic way and guide all levels of the people's courts to deal properly with enterprise bankruptcy cases. Currently, the work of drafting this judicial interpretation is in the early preparation stage of investigation and research. In terms of timing, neither Mr Lam nor Mr Lai could estimate when the challenges might finally be overcome. Mr Lai said the issues would be dealt with over time, and Mr Lam indicated that a further two or more years should see an improvement. 'The law has been implemented for more than a year, and during this period of time the judges have gained some practical experience as to how to handle cases,' he said. 'Based on our experience, I think things will become smoother once the judiciary and others involved have two to three years' experience dealing with these cases. Only time can tell,' Mr Lam said.